Hes renting out a house that he don't own

saying that goes like this:

No good deed goes unpunished.

(I think you are opening Pandora's box with this one in regards to the future renters, not to mention the seller who will want a piece of the action once he sees what you are doing)

Be careful with this one.

Too many "What Ifs"

My plan is to disclose all to the seller and renters exactly what is happening. and have them sign the agreement acknowledging such. I have to ask though is this ethical? Would it be better to let the house sit empty while we try to short sale or sell it? I have heard that banks prefer someone in the house otherwise the potential threat of vandalism, theft etc. I think legally I'm OK, and with full disclosures on my contracts, I can sleep at night.

Hi! Randy,
Can you find someone and do a rent to own? You can have them settle like a lease option. at the meantime negotiate with the bank to get a good short sale deal(if the loan amount is too big for the buyer, in your case would be the renter). Just my 2 cnts, without knowing too much of it! You could either have the original owner hold the title and new renter make the payment, or have the someone else hold the title and have a nice tenant live in there with intention of buying in future to take good care of the property.

I was in a similar situation, I was collecting rent without a written agreement and the homeowner took me to court for breach of trust. The judge handling the situation was nice and explainef to me that in the court eyes I was acting as a Property Manager for the owner. I had to pay the owner the rent money less my fee of course. My question to you after you pay the owner his rent which legally is his and split with your bird dog us it worth it. Seems to me you have too many people getting a cut of your blessing.

The loan balance is 160K The current value is 90K The seller is or was making interest only payments of a little over 800 buks. The balloon is due in 2012 for the full amount. You can see why this seller is walkin. I havnt got all the details yet as I am currently preparing the contract and will have a chat with the seller tomorow. Yea ur right, the possibility of a successful short sale is minimal, but its worth a try. A strategic foreclosure is my exit plan, just rent the property till the bank takes it. I wont have any money in this deal,just a little time and effort. My seller is willing to just sign the house over to me for nothing except a $10 option fee. The house has been empty for a while, grass is dead, tall weeds. Whats really exciting is there are several other houses in this subdivision with the same exterior unkempt condition. The bird dog has several other leads.

(1) "Rent skimming" means using revenue received from the rental of a parcel of residential real property at any time during the first year period after acquiring that property without first applying the revenue or an equivalent amount to the payments due on all mortgages and deeds of trust encumbering that property. CA Civil Code 890

You might want to speak to an attorney before you start collecting rent and not paying the lender.

Hi Trina, my homeowner is signing the house to me and wants no part of it. She will sign a contract stating I can do repairs, sell, upgrade, market, rent or shortsale and she acknowleges the house may still go into foreclosure. Did u have this kind of contract with ur seller? Im trying to save my a_ _ with full disclosure. Were u lease optioning the property and then subleased it? and was keeping the rent? I wont be paying the seller or the bank any rent but instead pocketing it with my partner. Me bad

TRSD has me a bit worried, my partner the bird dog called a short sale company and they told him it was quite common for the investors to rent out the property while they wer in negotiations with the bank. My gut feeling is as long as there is complete disclosure with the seller and the renter the worst thing that can happen is the house goes back to the bank and we have made money trying to save it. It cud take the entire first months rent and deposit to clean up the property and paint the interior. The outside is just a half day of mowing and trimming. Im hoping the inside is not to bad cuz it is a newer home. My bird dog is excited as am I, he's a Minister and said we had gods blessing haha. Im not religeous but hey, that cant hurt.

Hey Rando:
I realize that you are trying to have full disclosure with any potential renter but let me ask you this: Do you have a tenant already in line or has committed themselves to your idea? What happens if you don't get a renter for say 3 months and the bank starts pushing the foreclosure, does the area have a lot of month to month renters? Are you ready to do all that work for just a few months rent? If not, it seems like there's quite a bit of work involved for very little guarantee.

Secondly, TALK TO AN ATTORNEY before you take one more step forward with this project to make sure that you have in fact covered your a_ _.

I don't see the benefit to the owner of the house unless she totally gets her name off the loan to the property. Just signing away the asset, I believe, doesn't stop the credit damage for her or satisfy the loan that's still in her name. Maybe in trying to assist her in the shortsale, you will be given some financial reward or safer access to the house for future rent.

Just a thought....

Andy Sager
DG's AndyS

This does not happen in CANADA..the bank holding the mortgage is insured for a certain amount and will only sell a forclosure if the amount paid is more than the insured amount..otherwise after about 6 months the insurer tries to sell the property for whatever they can get for it...a long drawn out process can take over 12 months from start to finish.Dgld

So Rondo....just so I am clear on this, you are planning on collecting $1100 in rent and not making the mortgage payments to the bank? If so, is that ethical?

Tommy, this predatory lender suckard this buyer into a high interest only balloon loan. She has sufferd for years trying to make these payments. Shes now fallen behind, shes stressed, depressed and looking for help. After the short sale or foreclosure the blood sucking lender will get what they deserve, a more realistic amount. and they will probably recieve Federaly funded insurance for their loss. I feel its my ethical duty to help this lady with this short sale. Is it ethical to keep a few bucks for my efforts? I think so.

justify the concept of ethics. The bank's unethical behavior toward the owner cannot be transferred to you. Your actions stand alone. Disclosures help but they might not be enough especially if your actions are against the CA civil code. Ethics justification is not a defense for breaking the law.

Cant argue with that reasoning. I have submitted the question to a RE Attorney and waiting for his reply.

Neither is ignorance justification for breaking the law, especially in the eyes of the law. You may be disclosing everything but that does make it legal. I believe you are setting yourself up to bitten in the a___. She needs your help and one way to pursue it is with the language of the contract (her Mortgage) balloon/interest only, she is a prime candidate for the Bad Loan as legal leverage. Find an attorney who specializes In RE and bad loans and ask for pro-bono Also sounds as if candidate for SS or at least modification and then pursue owner financing/lease option/ subject to
Theresa

(2) For purposes of this section, "rent skimming" also means
receiving revenue from the rental of a parcel of residential real
property where the person receiving that revenue, without the consent
of the owner or owner's agent, asserted possession or ownership of
the residential property, whether under a false claim of title, by
trespass, or any other unauthorized means, rented the property to
another, and collected rents from the other person for the rental of
the property. This paragraph does not apply to any tenant, subtenant,
lessee, sublessee, or assignee, nor to any other hirer having a
lawful occupancy interest in the residential dwelling.

This above paragraph is taken directly from the cival code.
My iterpretation of this law, is, As an assignee, I do have a lawfull occupancy interest in this property. I need to keep this propery occupied to prevent vandalisim, theft etc.

"My iterpretation of this law, is, As an assignee, I do have a lawfull occupancy interest in this property. I need to keep this propery occupied to prevent vandalisim, theft etc."

That's cool....as long as your interpretation is the same as the District Attorney's, you should have no problems.

removing the question of what's ethical or moral in the situation because they are open to each interpretation and only stand based on how your state interprets the law as it is written, therefore by which you will be held accountable.

may be a silly or drastic example but lets just say you stop at the Kwik Shop on the way home to get a gallon of milk, while at the counter a guy comes in points a gun and 'fully discloses' his intent to hold up the place and tell the store keeper he's going to shoot him if he does hand over the money. IF he pulls the trigger it DOES NOT release him of the liability of injuring or killing someone just because he fully disclosed his intentions.

bottom line, have a real estate attorney in the state which the property resides turn this inside out and go over with a fine tooth comb. Because I am sure the last thing intended would be for an act of assistance to turn into a headache or painful en devour.

point being it's all staking on the hopes of an approved short sale or if not then trying to catch it on the foreclosure side. Then if can't perform leaving the parties involved with an 'sorry....well that didn't work out'. That's not investing, that's gambling.

God bless,
Jen

Now I'm so worried I'm gonna Pass on this. It will be interesting to see wat the laywer has to say. I'm waiting his reply.

Ha, I have to laugh when people just spout out with this Predatory Lending all the time. Yes, I am sure this person was put into a corner and had no other options so she signed the paperwork. Its a shame when people can't take responsibility for their decesions, and even more of a shame when folks jump on the bandwagon without knowing all of what happened. Do you know who created the mortgage problem? A certain party decided everyone had a right to their own house and told banks that they needed to make loans to those that had no business having their own house. Did banks do things wrong, sure, after they were TOLD that they HAD to make loans to people that should NEVER of gotten them by our government. And now since everyone has let Clinton and Barney Frank and the cronies who got us into this mess off the hook, its all on the big bad banks, the ones that are left holding the bag that the GOV gave them.

Note to self: If Rando comes up with a deal and needs a partner, don't jump on it, he might look at me like a predatory lender and not pay his bill that he agreed to.

I posted this in a way that wud promote controversy, cuz of course I have doubts and fears. The input I've recieved is invaluable. I wud rather pass on this deal if there is the slightest chance of legal issues. But then again I dont want to easily give in to the naysayers. Always when someone tells me I can do something I make every effort to prove them wrong. But this is differant, I can argue ethics all day while sitting in the hosgow haha. Im still waiting for this lawyer to reply. I emailed him a question a few months ago and he called me back in 5 minutes. Hes kind of a celeb in Texas, Anybody heard of Mark Torok? He does the AMPS deals with Phill Grove.

Couldn't have said it better!!!

Michael Mangham
MD Home Acquisitions LLC

it was posted 'don't beat him up' is definately NOT what I believe anyone intended. Good, bad or ugly, I believe most everyone here is with common best interest at heart. More so of brainstorming and thinking outloud 'in post'. Great thing about so many people being involved on DG, you get different views, thoughts and ideas off every post. Sometimes asking questions will give you a strategy we haven't thought of before, or pose an area of caution we overlooked in excitement of 'being in the game'!

As iron sharpens iron!

Good job Randy and keep us tuned on the outcome.

Make it happen!

God bless,
Jen

Hi Rando1, I feel your a wonderful person in what your trying to do but an Attorneys legal advise on this one would end your worries in which way to go an what fee they charge could an should save you from going down the right or wrong road with your wonderful kindness an it an it doesnt hurt to be discreet an go the extra mile an find out your legal rights an then you have something to ride on , just make sure there a good attorney an youll be glad you did, hang in there an let us know what happens, thanks, sincerely, Jim ( Proverbs 14:15 Anyone inexperienced puts faith in every word, but the shreewd one considers his steps; an a good attorney can help you do thid who knows Realestate Law. One person has been hurt lets not let the next one be you with your kindness an the Bible is one of the BEST BOOKS EVER WRITTEN TAKE ITS ADVICE!!!!! HAVE AN AWESOME DAY MY WONDERFUL FRIEND, YOU DESERVE THAT.Remember the THE OLE SAYING BETTER SAFE THAN SORRY an keeep up the wonderful work you will be blessed for it.

Would it have been possible to make the $800 monthly payment directly to the bank through an escrow account while your talking with the bank. If you have proof the seller is ok with you talking to the bank and renting it out. I would think it would give you some bargaining power. Plus if you can get the $1100 per month you would be making a profit! This way everyone's happy, banks getting paid, your making income while dealing with the bank, your in a sandwich lease so the renters have some protection, the current owner does not have to make the payments, your paying the mortgage so you know the $800 is not getting pocketed by the seller. WIN/WIN

Any thoughts?

Rando:
Good job with getting in touch with a lawyer. I think that's the only way this issue should be considered prior to moving forward.

Legal-A good lawyer friend of mine told me that the law doesn't always make sense but it is "THE LAW". These rules are what we are governed with. In my eyes, that means that if it's legal, you can do it.

Ethics- Just because something is legal to do, is it ethical to do? That's up to you. Let's just say that the Big Old Bank didn't do anything morally or ethically wrong and they just supplied a loan to someone who asked the bank for the loan and at the time, they could afford it. Things changed and now that person cannot afford it. You step in to try to help because that's what you do...You help people out of financial distress. This assistance leads you to your current rental scenario. If it were legal to do, would you do it? If you were told by your lawyer that it's legal but unethical to do, would you do it?
Big decision time... Can you sleep at night knowing that you helped someone out of a bad situation even tho what you did was unethical? Is hurting one person to help another person something you are willing to do? I base my decisions on my ability to sleep afterwards. I know that lack of sleep leads to mental breakdown. If what you do doesn't allow you to sleep, you should not be doing it.

Dean's philosophy is to create Win/Win or Win/ Win/ Win scenarios. Doing this, will make everybody sleep better.

Just my thoughts...

Andy Sager
DG's AndyS

Do you know the differance between a catfish and a laywer? Well, one is a botom feeding scum sucker, and the other is just a fish. I had a girl friend in law school yrs ago and wen I told her this joke she wasnt amused. I'm still waiting a reply from the lawyer. We got a shortsale company going to do all the negotiations for us on this property and then split the profits if a sale takes place down the road. I will contact the lender and explain the house is empty and vulnerable to theft and vandelasim and we need to get someone in ther to watch the place while the short sale if being negotiated and emplemented. I got a contract signed by the seller giving me the option to purchase for 2 yrs. And while all this is going down I got another big deal going on and am ordering a boatload of blank door hangers for the bird dog to pass out. Of course I'll print them first. I order ink in bulk bottles and fill my printer ink tanks myself. Rando

I left an email for the Attorney, he said it was OK in his legal opinion, but just to be sure to check with a local Attorney. My partner ran it by the Short Sale Company and they told him it was done by many investors and quite common. My partner went over and took a close up look at the house. Said it was in excellant condition cept for some yard work and maybe some cleaning. He wants to do this, The area is a hot rentle market, $1100 is common for a nice 3/2 and this is a 4 bdrm. Hes Gung Ho, and hes a minister. Im still worried, but its gettin near the time we gotta make a decision. To rent or not to rent? That is the question. Shud I be worrid about som civil code when I have a lawful interest in the property?

Anyone have any more thoughts on this? It was a very interesting read, and I'm sure many on here would like to know how it turned out...